Page 1

DE CE M BE R 20 1 8

CIO of the Year & Biz Tech Award Winners 6TH ANNUAL

Supply Chain Report TECH SOLUTIONS GUIDE:

Customer Management CGTech Tips: TPM

Consumer Goods Companies 2018 Our 16th annual report on the world’s largest public product manufacturers


CONTENTS DECEMBER 2018

VOLUME 26 NUMBER 6

COVER STORY

The Top

EXECUTIVE COUNCIL

Consumer Goods Companies of 2018

How do we know our 16th annual list of the largest public consumer goods companies is hotly anticipated? Because of the almost 60,000 industry professionals who viewed the 2017 version online over the last 12 months. This year’s coverage includes a deep-dive into recent business and IT-related activity at the 10 largest CGs.

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Departments

Special Reports

03

10

23

EDITOR’S NOTE

Don’t look now, but we’ve been digitally transformed.

Customer Management CGT presents a comparison chart of solution providers on the forefront of developing tools that help consumer goods companies improve their retailer relationships. Plus, a roundtable of industry experts provides thought leadership for companies navigating this critical business need.

AWARDS

Business & Technology Awards 2018

If you need to find best practices in IT leadership, supply chain transformation, forward-thinking retail collaboration or new-business innovation, you’ve come to the right place. CGT showcases its annual slate of industry award winners, including our “CIO of the Year.”

TECHNOLOGY SOLUTIONS GUIDE:

14

SUPPLY CHAIN 2018

Building the Consumer Value Chain

The evolution toward an omnichannel marketplace is driving industry-wide upheaval. With help from IDC Manufacturing Insights and Oracle, CGT examines the state of the supply chain in this fifth-annual report.

33

CGT ADVISORY BOARDS

CGTECH TIPS

The ABCs of Trade Promotion Management

Subject matter experts from UpClear and Visuafabriq examine the steps that companies should take to ensure that their trade investments aren’t squandered.

Julia Anderson Smithfield Foods

EJ Kenney SAP

Denny Belcastro Kimberly-Clark

Werner Graf Mindtree

Tony Bender EBITDA Consulting Partners

John Phillips PepsiCo

Tony Costa Bumble Bee Foods Kerry Farrell Eversight Michael Forhez Oracle Mike Gorshe Accenture Jon Harding Conair Corp. Justin Honaman Accenture

Kevin Puppe Johnson & Johnson Rich Scuteri L’Oreal Doug Rammel BAI Suavecito John Rossi Steve Sigrist Newell Brands Cheryl Williams Wakefern Food Corp.

EDITORIAL

Kevin Barnes Ferguson Enterprises Tony Bender Fmr. Edgewell Personal Care Rick Brindle Mondelez International Ann Dozier Southern Glazer’s Wine & Spirits Michael Ferrara HairUWear Jon Harding Conair Corp. Peter Hatch Reynolds American Inc. Service Co.

Chris Hobson VF Corp. Constance Howlett Estée Lauder Betsey Nohe Morton Salt John Phillips PepsiCo Kevin Puppe Johnson & Johnson Doug Rammel BAI Suavecito Steve Sigrist Newell Brands Filiz Yavuz Perry Ellis International

RESEARCH

Werner Graf, Chair Mindtree Gene Alvarez Gartner Michael Forhez Oracle Nona Cusick Capgemini Simon Ellis IDC

Don Lanham Hitachi Consulting Meena Surti Patel Cognizant Cheryl Perkins Innovationedge LLC Steve Rosenstock Clarkston Consulting

Consumer Goods Technology (USPS 0011-255, ISSN 1530-8421) is published 6 times per year: February, April, June, August, October and December, by EnsembleIQ, 1 Gateway Center, 11-43 Raymond Plaza, FL16, Newark, NJ 07102. Subscription rates: $89 for U.S. addresses; $99 for Canadian addresses; $109 for all other addresses. Single copies are $20; add $2 for postage to Canada, or $5 to other countries. For Air Mail, add $65. Copyright 2016 by Ensemble IQ. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording or information storage and retrieval system without permission in writing from the publisher. Periodicals postage paid at Newark, NJ 07102 and additional mailing offices. Reprints, permissions and licensing, please contact Wright’s Media at ensembleiq@ wrightsmedia.com or (877) 652-5295. POSTMASTER: send address changes to: Consumer Goods Technology, PO Box 1842, Lowell, MA 01853-1842.

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CGT | DECEMBER 2018 | CONSUMERGOODS.COM


A Year of Living Digitally

MANAGING DIRECTOR AND PUBLISHER Albert Guffanti aguffanti@ensembleiq.com

I don’t want to overstate things, but it seems pretty clear that all the discussion we’ve been having about digital transformation over the last few years seems to have taken hold. As we learned while putting together the content for this issue, it’s no longer necessary to specifically ask if consumer goods companies are digitizing (or is it digitalizing?) their business activity to address change. Digital transformation is now driving not only the IT agenda, but the entire business agenda. It is certainly the primary catalyst for the changes discussed in our 6th annual Supply Chain Report, although in the interest of full disclosure I should note that we deliberately set out to examine the ways in which e-commerce is forcing CGs to modernize their traditional practices. If you want to learn about those ways, check out the report on page 14. (A special thanks to Simon Ellis of IDC Manufacturing Insights and Mario Vollbracht of Oracle for their contributions to this year’s content.) On the other hand, we definitely did not plan to focus exclusively on best practices in digital transformation through our annual Business Technology Awards program (page 10). But that’s exactly what happened anyway. If you want great examples of the potential benefits of digital tools and technologies, read about the many digitally driven accomplishments of our CIO of the Year, Unilever’s Jane Moran; or the e-commerce business model of SMB Award winner Brandless; or the VR-driven collaboration in our Customer Management Award case study with Coca-Cola and Walgreens; or, maybe most of all, the complete end-to-end business transformation underway at Supply Chain Award winner Nike. It’s not as easy to spot the digital transformation lurking within our “Top 100 Consumer Goods Companies” for 2018 (page 5). But three of the four CGs mentioned above are featured prominently on the list (among the 15 largest companies, in fact). And our profiles of the top 10 companies provide some more good examples of digital change. The message? Even the industry’s oldest, largest enterprises are reinventing themselves. Finally, the latest edition of our Tech Solutions Guide series features a quartet of subject matter experts discussing the impact of e-commerce on traditional methods of customer collaboration (page 23). So, as we close out 2018 and head into a new year that will, most certainly, be filled with more challenges and opportunities, we here at CGT would like to wish all of you in our audience Happy Holidays and great success in the digital future that’s ahead of us. Welcome New Board Members Our always dedicated Executive Advisory Council has been even busier than usual lately. In addition to helping make our October League of Leaders meeting a huge success with its thought leadership, the group held elections to expand its ranks to a robust 18 members. We’d like to express our deepest gratitude to the following industry leaders who’ve agreed to join the board and help guide CGT into the future with their experience and expertise: Tony Costa of Bumble Bee Foods, Kerry Farrell of Eversight, Werner Graf of Mindtree, Rich Scuteri of L’Oreal, and Cheryl Williams of Wakefern Food Corp. You’ll hear more about them in the coming months, but since they’ve already started in their roles, we wanted to officially welcome them here.

EDITORIAL Editor-in-Chief: Peter Breen pbreen@ensembleiq.com Contributing Editors: Tim Binder, Jacqueline Barba, Patrycja Malinowska, Charlie Menchaca, Cyndi Loza SALES Associate Brand Director: Bill Little blittle@ensembleiq.com EVENTS Vice President, Events: Ed Several eseveral@ensembleiq.com Director, Event Planning: Patricia Benkner pbenkner@ensembleiq.com Director, Event Content: John Hall jhall@ensembleiq.com AUDIENCE ENGAGEMENT Director of Audience Engagement: Gail Reboletti greboletti@ensembleiq.com Audience Development Manager: Shelley Patton spatton@ensembleiq.com ONLINE MEDIA Director Product Development: Jason Ward jward@ensembleiq.com Online Project Manager: Whitney Gregson wryerson@ensembleiq.com PROJECT MANAGEMENT/ PRODUCTION/ART Vice President, Production: Derek Estey destey@ensembleiq.com Creative Director: Colette Magliaro cmagliaro@ensembleiq.com Production Manager: Patricia Wisser pwisser@ensembleiq.com Art Director: Lauren DiMeo ldimeo@ensembleiq.com Subscriptions: 978-671-0449

CORPORATE OFFICERS Alan Glass David Shanker Dan McCarthy Joel Hughes Tanner Van Dusen Ed Several

Executive Chairman Chief Executive Officer Chief Financial Officer Chief Digital Officer Chief Innovation Officer Executive Vice President, Events & Conferences

CORPORATE OFFICE 8550 W. Bryn Mawr Ave. Ste. 200 Chicago, IL 60631 Phone: +1 773-992-4450 Fax: +1 773-992-4455 www.consumergoods.com

Peter Breen, Editor-in-Chief

CONSUMERGOODS.COM | DECEMBER 2018 | CGT

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Changing Tastes:

The Year in Review Industry transformation has become readily apparent, from top to bottom

CONSUMER GOODS COMPANIES 2018

W

hen the industry’s largest public company sells off its namesake brand, it’s clear that the consumer goods marketplace is undergoing a period of dramatic transformation. But that’s exactly what happened in 2018, when Nestlè sold off its namesake U.S. confectionery business to privately held Ferrero Group. The deal was perhaps the most noteworthy out of the many that occurred over the course of 2017-2018, not necessarily because of its size (a $2.8 billion transaction) but because of the way it reflects a major company’s response to changing consumer demand. After moving away from its historical flagship category, Nestlè continued revamping its portfolio to address a growing need for healthier eating options (see more below). IDC Manufacturing Insights keeps noting that less than 3% of net industry growth over the last three years has come from traditional, large enterprises — like the ones presented here on CGT’s list of the “Top 100 Consumer Goods Companies” for 2018. While nearly three-quarters of these companies posted revenue growth last year, the total dollar figure for the group was $1.73 trillion — $150 million less than the complete tally back in 2003, the first time that CGT compiled the list. What’s more, a significant portion of last year’s growth came not through organic sales increases but from mergers and acquisitions — $95.3 billion of which took place in 2017 from just 17 major deals, according to Deloitte. Traditional companies aren’t just buying up the emerging brands that have, in so many cases, beaten them online; they also continue to acquire each other in efforts to maintain shrinking market share or focus on different categories that better address the needs of today’s consumers. All this disruption still hasn’t affected our an-

nual rankings too much. As has been the case over the last few years, only two companies have fallen off the list: tobacco marketer Reynolds American, which now is part of British American Tobacco (No. 23), and Turkey-based appliance manufacturer Arcelik AS, which just barely missed the cut. They were replaced by France-based cheese specialist Savencia (at No. 86) and U.S. household goods manufacturer Church & Dwight (100). The following is a profile of recent activity at the industry’s 10 largest companies. The trends are not hard to spot.

1

Nestlé SA Even before it began 2018 with its watershed move away from candy, Nestlé was busy in 2017 reinforcing its high-end coffee portfolio by scooping up complementary brands Chameleon Cold Brew and Blue Bottle. It also entered the plant-based protein market with the purchase of Sweet Earth Foods and boosted its health and wellness strategy with vitamin-maker Atrium Innovations. This investment in key brands, coupled with a constant and comprehensive review of its “Value Creation Model,” has kept Nestlé very busy: The company has zoned in on advancing high-growth food and beverage categories (coffee, pet care, infant nutrition and bottled water), and expanding its presence in emerging geographic markets. As for the future, Nestlé is examining which technologies will best help it stay on top of trends. Chief information officer Filippo Catalano recently told Marketing Week that “the Internet of Things is becoming an important platform for brands,” noting that Nestlé sits in an advantageous position as a company that sells products and appliances that can be connected (think coffee and beverages) to consumers in their homes.

CONSUMERGOODS.COM | DECEMBER 2018 | CGT

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RANK

2

Philip Morris International Philip Morris International marked 2017 as a “landmark year in its transformation for a smokefree future.” The growth that the company experienced underscored the enormous promise of “reduced-risk products” (a term trending in tobacco company annual reports this year), the strength of the combustible product portfolio, and the commitment of its employees to leading industry transformation. In fact, PMI attributes its strong financial results to the product development, commercialization and science behind flagship smoke-free product IQOS, which exceeded expectations. The trend toward RRPs has initiated fundamental changes to operating models, organizational structure and culture, which has accelerated an “evolution into a consumer-centric, technology and science-driven company,” according to the annual report. To keep up with the accelerated expansion of the heated tobacco unit and IQOS, the company undertook a major revamp of its manufacturing and supply chain activities in 2017, increasing machines, production efficiency and facilities while reducing per-unit costs.

3

Procter & Gamble P&G has significantly streamlined its product portfolio in recent years. (Divestiture of its “Beauty Brands” actually gave Coty, Inc. a boost in this year’s rankings). But its remaining 65-odd brands are leading the market in 10 category-based businesses. As such, P&G has not been shy about plans to save up to $10 bil-

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CGT | DECEMBER 2018 | CONSUMERGOODS.COM

COMPANY

2017 NET SALES ($M)

1-YEAR GROWTH

KEY EXECUTIVE**

1

Nestlé SA*

$89,139

0.4%

Filippo Catalano

2

Philip Morris International

$78,098

4.2%

Patrick Brunel

3

Procter & Gamble

$65,058

-0.4%

Javier Polit

4

PepsiCo

$63,525

1.2%

Jody Davids

5

Unilever N.V.*

$60,628

1.9%

Jane Moran

6

Anheuser-Busch InBev

$56,444

5.1%

Felipe Dutra (1)

7

Christian Dior, SE*

$49,287

11.0%

Pietro Beccari (2)

8

LVMH

$48,122

13.0%

Franck Le Moal

9

JBS S.A.*

$43,132

-4.2%

Rogerio Peres (U.S.)

10

Tyson Foods

$38,260

3.7%

Scott Spradley (3)

11

Coca-Cola Co.

$35,410

-15.5%

Barry Simpson

12

Nike, Inc.

$34,350

6.1%

Skip Potter (3)

13

Imperial Brands PLC*

$34,140

9.5%

Chris Broe

14

3M Co.

$31,657

5.1%

John Turner

15

L’Oréal*

$29,381

0.7%

Etienne Aubourg

16

Danone*

$27,863

12.5%

Cecile Cabanis (4)

17

Kraft Heinz

$26,232

-0.9%

Francesco Tinto

18

Mondeléz International

$25,896

-0.1%

Joher Akolawala

19

Altria Group

$25,576

-0.7%

Daniel Cornell

20

Heineken Holding N.V.*

$24,717

5.3%

Anna Ransley

21

Adidas AG*

$23,964

15.0%

Michael Voegele

22

Qingdao Haier Co.*

$22,918

33.7%

Fred Li

23

British American Tobacco PLC*

$22,916

37.6%

Marina Bellini

24

Henkel AG*

$22,622

7.0%

Joachim Jaeckle

25

WH Group Ltd.

$22,379

3.9%

Julia Anderson (Smithfield)

26

Whirlpool Corp.

$21,253

2.6%

Michael Heim

27

BSH Hausgeräte*

$20,770

4.2%

Joachim Reichel

28

Fonterra Cooperative Group

$19,232

12.0%

Gerben Otter

29

Japan Tobacco*

$18,865

-0.2%

Yuki Maeda (6)

30

Asahi Group Holdings*

$18,382

22.1%

Akiyoshi Koji (2)

31

Kimberly-Clark Corp.

$18,259

0.3%

Suja Chandrasekaran

32

Kering*

$17,484

25.0%

Sangita Naik (7)

33

Associated British Foods*

$17,350

15.0%

Aslam Osman (8)

34

Kirin Holdings*

$16,433

0.5%

Noriya Yokota (4)

35

General Mills

$15,620

-0.6%

Don Monk

36

San Miguel Corp.*

$15,573

21.0%

Clifford Que (9)

37

Colgate-Palmolive Co.

$15,454

1.5%

Michael Crowe

38

Newell Brands

$14,742

11.1%

Dan Gustafson

39

Diageo PLC*

$13,616

14.9%

Manish Gupta (3)

40

Johnson & Johnson (Consumer)

$13,602

2.2%

Stuart McGuigan

41

AB Electrolux*

$13,426

0.8%

J.P. Iversen

42

Kao Corp.*

$13,136

2.2%

Robert Garriott (10)

43

Grupo Bimbo*

$13,105

6.1%

Ruben Marquez-Villegas

44

RB*

$13,009

21.4%

Seth Cohen

45

Uni-President Enterprises*

$12,932

-3.3%

Chih-Hsien Lo (11)

46

Kellogg Co.

$12,923

-0.7%

Brian Rice

47

Stanley Black & Decker

$12,747

12.0%

Rhonda Gass

48

Compagnie Financiere Richemont SA*

$12,033

-4.0%

Jean-Jacques van Oosten (3)

49

Essity (form. Svenska Cellulosa)*

$12,019

8.0%

Robert Sjostrom

50

Estée Lauder Companies

$11,824

5.0%

Michael Smith

*Dollar amounts configured by CGT using conversion rates on Nov. 14, 2018. **All listed executives are Chief Information Officer except (1) CFO/CTO; (2) CEO; (3) CTO; (4) CFO; (5) President; (6) SVP Corporate Strategy & IT; (7) Head of Governance & Control, Americas; (8) Head of IT; (9) AVP, IS Management;


RANK

COMPANY

2017 NET SALES ($M)

1-YEAR GROWTH

KEY EXECUTIVE**

51

VF Corp.

$11,811

2.6%

Chris Hobson

52

MolsonCoors Brewing Co.

$11,002

2.6%

Darrin Vohs

53

Nipponham Group*

$10,606

-2.2%

Yoshihide Hata (2)

54

Pernod Ricard*

$10,183

4.0%

Mathieu Lambotte

55

Carlsberg A/S*

$9,372

-1.3%

Mark Dajani

56

Hormel Foods

$9,168

-3.7%

Mark Vaupel (12)

57

PVH Corp.

$8,915

9.0%

Eileen Mahoney

58

Shiseido Co.*

$8,866

18.2%

Mitsuru Kameyama

59

BRF - Brasil Foods*

$8,845

-0.8%

Adhemar Hirosawa

60

GlaxoSmithKline Consumer*

$8,760

8.0%

Karenann Terrell (13)

61

China Mengniu Dairy Co.*

$8,655

11.9%

Jeffrey Lu Minfang (2)

62

Saputo, Inc.*

$8,429

1.6%

Richard Rivard

63

Beiersdorf AG*

$7,976

4.5%

Barbara Saunier

64

Swatch Group SA*

$7,916

5.4%

Calogero Polizzi

65

Campbell Soup Co.

$7,890

-0.9%

Francisco Fraga

66

Conagra Brands

$7,826

-9.7%

Mindy Simon

67

Dean Foods Co.

$7,795

1.1%

David Bernard

68

Coty, Inc.

$7,650

75.9%

Jerry Flasz

69

Parmalat SpA*

$7,569

3.2%

Carlo Polese

70

Hershey Co.

$7,515

1.0%

Terence O'Day (14)

71

J.M. Smucker Co.

$7,392

-5.0%

Bryan Hutson (15)

72

Groupe SEB*

$7,340

30.0%

Jean-Michel Andre

73

Constellation Brands

$7,332

12.0%

Ricardo Bartra (3)

74

First Pacific Co.

$7,297

8.0%

Manuel Pangilinan (2)

75

Dr Pepper Snapple Group

$6,690

4.0%

Thomas Farrah

76

Ralph Lauren Corp.

$6,652

-10.2%

Janet Sherlock

77

Bayer Consumer Health*

$6,627

-2.9%

Daniel Hartert

78

Hanesbrands

$6,471

7.3%

Cindy Miller

79

Hermes International*

$6,290

7.0%

Chris Ashworth

80

ITC Ltd.*

$6,164

5.8%

V.v. Rajasekhar

81

Clorox Co.

$5,973

4.0%

Jay McNulty

82

Thai Beverages Public Co.*

$5,762

35.7%

Pisanu Vichiensanth *

83

PT Gudang Garam*

$5,637

9.2%

Istata Taswin Siddharta

84

Unicharm Corp.*

$5,633

6.1%

Takahisa Takahara (2)

85

Avon Products

$5,565

-0.2%

Benedetto Conversano (16)

86

Savencia SA

$5,495

9.8%

Ronan Loaëc (Americas)

87

Bandai Namco Holdings*

$5,443

7.7%

Shukuo Ishikawa (2)

88

Post Holdings

$5,225

3.9%

Joseph Caro

89

Hasbro, Inc.

$5,210

3.8%

Steve Zoltick

90

Spectrum Brands Holdings

$5,007

-0.7%

Mark Winger

91

Kewpie Corp. (QP Corp.)*

$4,932

1.7%

Osamu Chonan (2)

92

Mattel, Inc.

$4,882

-11.0%

Sven Gerjets (3)

93

Sapporo Holdings*

$4,848

1.8%

Masaki Oga (5)

94

Electronic Arts, Inc.

$4,845

10.0%

Jason Horwath

95

McCormick & Co.

$4,834

9.6%

Ken Thomas

96

Herbalife Ltd.

$4,427

-1.4%

Rich Libby

97

Husqvarna AB*

$4,334

9.5%

Anders Johanson (3)

98

Nintendo Co.*

$4,302

-3.0%

Todd Bruce

99

Brown-Forman

$3,857

-3.8%

Tim Nall

100

Church & Dwight Co.

$3,776

8.1%

Kevin Gokey

(10) Regional Executive Officer, VP EIS; (11) Chief Strategy Officer; (12) VP, IT services; (13) Chief Digital & Technology Officer; (14) Chief Product Supply & Tech Officer; (15) VP, IS; (16) SEVP, Technology & Engineering; (17) Asst. GM, Production & Technology.

COVER STORY

lion from fiscal 2017 through 2021 by delivering on the four key elements outlined below. P&G believes its greatest savings will come in (1) cost of goods sold through opportunities in raw and packaging materials, manufacturing, transportation and warehousing as the company fully synchronizes its supply network and replenishment systems. In (2) marketing spend, it plans to drive down media rates and waste, reduce agency/advertising costs and improve efficiency of in-store materials and direct-toconsumer programs. Elsewhere, trade spend (3) is another large pool, where just a 10% efficiency improvement will result in meaningful savings (through improved execution and optimized investments). Finally, overhead spending (4) will focus on increasing end-toend business accountability. Another significant move in 2017 was the appointment as CIO of exCoca-Cola veteran Javier Polit, who brought a passion for technologies within mobile commerce, customer analytics, the IoT and digitization.

4

PepsiCo In April 2016, the company tapped into the IT expertise of CIO Jody Davids to continue “digitizing PepsiCo for growth.” To that end, Davids has been working on “delivering technologies that automate business processes, analyze data for business insights and enable employees to collaborate more easily,” he told Forbes. PepsiCo has been challenged with identifying innovative products that will appeal to the healthier snack and beverage preferences of Millennials.

CONSUMERGOODS.COM | DECEMBER 2018 | CGT

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And with Davids at the helm, it has been busy stabilizing and centralizing its IT systems, ultimately creating a 95% improvement in service uptime. After creating a more solid IT function, the focus has shifted to the standardization and harmonization of data to make better decisions for both retail customers and consumers. “We think the next frontier is the consumer,” Davids told Marketing Week, where she also noted working with the businesses on automation and digitalization. Next on the CIO’s to-do list is blockchain, which Davids believes holds intriguing potential for all large corporations.

5

Unilever Chief marketing officer Keith Weed may have summed up Unilever’s recent efforts best when he said, “For consumers, 2017 was the year of mobile video and voice. However, for the industry, if it was anything, it seemed to be the year of the digital supply chain.” Unilever has undertaken well-publicized initiatives into new technology and marketing tools. The company also adjusted the portfolio in 2017, selling off the spreads business while picking up a handful of brands “with purpose.” Acquisitions in 2017 included Brazilian natural food company Mãe Terra, Millennial-focused beauty outfit Sundial Brands, and specialty tea brand Tazo. Unilever also attributes recent growth to work at the Unilever Foundry platform for startups and innovators. Two examples: Knorr partnered with artificial intelligence specialist Digital Genius to reach consumers in emerging countries such as India, and a fully automated “Chef Wendy” chatbot provided recipe suggestions via SMS.

6

Anheuser-Busch InBev As elsewhere, 2017 was a “transformative year” for A-B InBev, according to the company’s annual report. The beer giant is now reaping the benefits of merging with SAB, which reportedly have exceeded expectations. The company has reshaped its brand portfolio, united top talent and integrated best practices to create synergies at an accelerated pace. In line with many of the heavy-hitters that make the Top 100 list, A-B InBev has adopted a new way of looking at the beer category, recognizing the distinct maturities of developed and developing markets. In other words, the consumer is king (or queen). The successful launch of core brands into new territories to drive category

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CGT | DECEMBER 2018 | CONSUMERGOODS.COM

growth all starts with “deepening our understanding of consumers and occasions across all markets.” With a deeper brand bench and the sheer scale of the combined companies, A-B InBev is set to dive into new and disruptive technologies to listen and reach these kings and queens. For example, ZX Ventures is a global growth and innovation group that identifies “exciting opportunities to pilot new products, channels, occasions and retail experiences to offer more choice to consumers.”

7

Christian Dior In mid-2017, Christian Dior became the holding company of LVMH, the world’s largest luxury goods conglomerate (and No. 8 on this year’s list). But it was a busy year elsewhere as well. The company acquired German suitcase manufacturer Rimowa, premium vineyard Colgin Cellars and spirits maker Woodinville. Although it already had a substantial e-commerce footprint (which grew 30% in 2017), Christian Dior continues to develop digital activities. The company is piggy-backing off the success of Sephora’s omnichannel sales strategy while increasingly working to develop connected products, like TAG Heuer watches. Other premium digital services launched in 2017 include 24 Sèvres, the digital platform of department store Le Bon Marché; Clos19, an event company offering upscale “cultural immersions”; and the Vivatech trade fair co-organized by subsidiary Les Echos, which invests in direct collaborations with startups.

8

LVMH Moët Hennessy Louis Vuitton LVMH Moët Hennessy Louis Vuitton is also betting heavily on digital and omnichannel, largely through strong collaboration with the Sephora retail business. But a major focus for the company in 2017 was the supply chain. At the moment, it has applied best practices to 70% of the function company-wide, with a goal to reach 100% in 2025. Among key initiatives is the development of a sustainable procurement policy that will protect the many raw materials used in its products. Traceability and compliance are also manufacturing priorities. The company has experienced online growth in Scandinavia, Mexico and the Middle East. The overall goal is to improve geographical coverage and serve consumers with agility wherever they may be and whenever it’s needed. In line with Sephora’s key strategic success drivers, LVMH is placing an emphasis on “the dedication and professionalism of its teams at physical stores and online, increasingly innova-


COVER STORY

tive and personalized offerings of both products and services” and an “ongoing rollout of omnichannel strategies” and consumer loyalty initiatives. One such example of these initiatives are smart mobile apps that plug into social networks so the chain’s “Beauty Insiders” can become vital members of thriving communities.

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JBS While many consumers have likely never even heard of JBS, the company has become one of the largest manufacturers of meat in the world. It slipped a bit in the rankings this year, however, due to a number of pain points related to the integration of multiple, major acquisitions of such more consumer-friendly names as Swift, Pilgrim’s Pride and Samco & Weddel. JBS has been hard at work expanding production capacity and has made investments in updating technology infrastructure at food processing facilities around the globe. A key piece of the growth strategy is a major commitment to transparency. The company launched a global compliance department that operates independently and reports directly to the board of directors. This initiative includes training courses for all leadership, new policies and procedures. Also in 2017, JBS established a global food quality and safety department to improve the deploy-

Rules & Guidelines INCLUSION

Since the annual revenue of most privately held consumer goods companies is not available, CGT’s Top 100 list only includes publicly traded companies. Therefore, well-known manufacturers such as Mars Inc., Ferrero Group and Dole Food Co. are absent from the rankings. (Mars, for instance, would be a top 15 company with its roughly $35 billion in annual sales.) It should also be noted that only revenues from the sale of consumer goods are considered when ranking companies that also have extensive operations in other

ment of quality programs and expand access to global export markets by first meeting, then exceeding, stringent quality control and safety standards.

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Tyson Foods Tyson crept up into the Top 10 in a year marked by major initiatives that started with the appointment of Scott Spradley as chief technology officer in June 2017. The 83-year-old meat producer has been striving to consolidate its disparate IT systems and tap into new technologies. Spradley has been charged with reinventing Tyson as a modern food company by leveraging data analytics, cloud computing and all things digital. In a move that’s probably now mandatory for all food manufacturers, the company is working on greater transparency and sustainability to keep pace with ever-intensifying consumer demands. Next on Spradley’s to-do list is a shift away from customized business applications: The CTO told The Wall Street Journal last February that 55% of Tyson’s application stack is custom-developed. The team therefore is working to significantly reduce that number and standardize business applications while embracing open source software in a bid to keep pace with the new wave of digitally native competitors. CGT

businesses (such as the pharmacy and medical device operations at Johnson & Johnson).

RANKINGS

Because fiscal 2018 has yet to close for many companies, CGT used fiscal 2017 revenue totals to determine each company’s placement on the Top 100 list. All financial information was sourced from Hoover’s Inc. or, in some cases, the company’s most recent annual report. Revenue for each company is reported in millions of U.S. dollars. If a company’s revenue was reported in a different currency, the amount was calculated using a

predetermined neutral exchange rate (Nov. 14, 2018). One-year gains are based on information from one of the aforementioned sources and methods.

M&A

In some cases, mergers, acquisitions or spin-offs that took place in the latter half of 2017 and 2018 (such as Dr Pepper Snapple Group’s merger with Keurig Green Mountain or Conagra Brands purchase of Pinnacle Foods) are not reflected in these sales totals. Deals that occurred in the first half of 2017 or earlier (like RB’s acquisition of Mead Johnson) are reflected in the numbers.

CONSUMERGOODS.COM | DECEMBER 2018 | CGT

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DIGITAL

TRANSFORMATION IN ACTION

CGT’s award winners present in-progress examples of new-age excellence. Here at CGT, we begin each year by seeking nominations for awards that honor consumer goods executives and companies that have envisioned and executed transformational business technology initiatives. The goal is to recognize achievements that not only have improved individual organizations, but which have the potential to inspire the industry at large. And then we conclude each year here in the December issue by showcasing the award winners, who are being officially unveiled over the next four pages. (Note: CMO of the Year Marie Gulin-Merle was already recognized in our August issue.) Although the awards recognize very different types of companies across varied business activities, there is one obvious commonality among this year’s crop of winners: They all exemplify best-in-class efforts to modernize — yes, to digitize — the traditional consumer goods organization. Without further ado, CGT proudly presents this year’s winners.

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CIO OF THE YEAR Jane Moran

Global CIO, Unilever

Under Moran’s guidance, Unilever is fast becoming a fully modern enterprise “Jane Moran is an innovative CIO and positive leader who seeks to develop her people in new thinking and technologies,” according to the executives from Accenture who nominated her — astutely, as it turns out — to be CGT’s CIO of the Year for 2018. “She is prepared to take risks and push the business forward to take on the disruption in our marketplace by implementing modern thinking, laying out a platform and product strategy for her organization before it was fashionable in the consumer packaged goods market,” continued the nomination. “More importantly, Moran has delivered on that strategy, creating platform ecosystems that connect people, processes, apps and professionals, all delivered with a new agile mindset and methodology.” CGT’s recent Tech Trends Report found that consumer goods companies are devoting equal attention these days to modernizing legacy systems and adopting new technologies. That seems to be the exact blueprint Moran has followed in her time as global CIO at Unilever, which began in June 2014 when she joined the company after 10 years in CIO roles at Thomson Reuters. Modernizing an enterprise that operates in 190 countries around the globe, interacts with 2.5 billion consumers daily, has 160,000-plus employees (including 100,000 working in offices) and utilizes 2,500 business applications is, of course, no small task. That’s why Moran has sought to instill practices that make the company more agile, in both the upperand lower-case senses of the word. “I don’t see myself as the owner of technology but as an architect laying the foundations, so that my partners in the business can bring in and deploy new disruptive technologies quickly, easily and safely, better do their day jobs and drive our business growth,” Moran once said in an internal interview. One key aspect of becoming more agile has been an effort to bring more IT functions back in-house, which has helped


Unilever pivot from “a project-oriented to a platform-based culture,” Moran told CIO UK last spring. “In an era when many CIOs are focused on vendor management, Moran went in the opposite direction and used her core architecture experience and expertise to digitally transform the legacy IT estate at Unilever,” explained the nomination. Roughly one-third of Unilever’s IT function is now in-house, which has led to cost savings and other efficiencies, Moran told the magazine. Meanwhile, moving to a DevOps methodology has enhanced Unilever’s ability to test new technologies faster and more efficiently. IT works with the company’s Unilever Foundry incubator to identify potential tools, but also relies on strategic solution providers to help vet the ever-growing possibilities. “I’ve found that a close collaboration with our key partners is mutually beneficial, as we can help trial new systems, approaches and technologies at scale,” Moran told CIO UK. “We innovate together, and that’s exciting for both parties.” Another key responsibility is using technology to drive Unilever’s ambitious sustainability agenda. “Our aim is to double the size of our business while reducing its environmental footprint and increasing positive social impact,” she explains on LinkedIn.

New Tools of the Trade “I am involved in some of the most innovative technology developments in the industry,” Moran also notes on LinkedIn, where she specifically mentions efforts to digitize “not only marketing but our supply chain and other key functions.” The list of new tools provided by her nominator included augmented and virtual reality, neuroscience and eye tracking. Moran herself also speaks often about the benefits of artificial

intelligence/machine learning and the Internet of Things. She also has been guiding Unilever more toward cloud services, along with robotics and other process automation. Blockchain implementation is on the horizon, too. One critical area of focus has been analytics and the democratization of data. Unilever has established a data lake and improved user interfaces in order to move reporting responsibility out of IT and into the businesses “to put the data in the hands of the employees that need to use the data,” Moran said at a 2018 Microsoft conference. “And it makes it easy for everyone in the organization to consume the data in this self-service way.” “At Unilever, our [business intelligence] systems have primarily, over the years, focused very well on looking back in history,” she said. By implementing these new technologies, “Now we have the enormous opportunity to predict the future.” Under Moran’s guidance, Unilever’s future seems to be heading in a pretty good direction.

RUNNER-UP Ann Dozier

Senior Vice President, CIO, Southern Glazer’s Wine & Spirits Since joining then-Southern Wine & Spirits in late 2013 (as vice president of IT), Dozier has been transforming the wholesaler’s IT function into an industryleading enterprise focused on delivering strategic commercial and supply chain capabilities that drive profitable growth and operational effectiveness. In addition to internal collaboration, her team has been delivering transformational capabilities and integrated solutions with both product suppliers and retailer customers in Southern’s three-tier business model. Among recent key initiatives on which Dozier has focused is the company’s digital enterprise program, where she’s expanded e-commerce activity, enhanced capabilities for the sales and service teams, and developed account-specific interaction with customers. She also is co-sponsoring efforts to improve promotion effectiveness by enhancing visibility from supplier to customer. Beyond driving sales and efficiency, the goal is to extend Southern Glazer’s’ leadership role in the value chain. “These programs are driving a substantive business-case benefit for Southern Glazer’s via improved sales productivity, topline growth and margin improvements through reduction in cost to serve,” according to Dozier’s nominator. It wasn’t long after she grabbed the reins as CIO in 2015 that Southern undertook a merger with Glazer’s Wholesale Distributors (in 2016). That tasked Dozier with driving synergies by integrating teams, infrastructure, service delivery capabilities, core transactional and selling systems, and business analytics. According to the nominator, her approach “has been focused on leveraging ‘best of the best’ solutions and using the opportunity to upgrade the capabilities of the business.” Among specific actions, she strove to ensure day-one integration by developing a data lake that gave the united company an integrated view of the business. “Ann views IT as a partner and advisor to the business and is a true believer in cross-functional collaboration as the driver of success for all strategic initiatives,” praises her nominator.

CONSUMERGOODS.COM | DECEMBER 2018 | CGT

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CUSTOMER MANAGEMENT AWARD Coca-Cola Co.

The beverage giant used VR testing to help Walgreens optimize the soda shelf By Tim Binder Once a year, Walgreens executes a beverage category reset, and it’s critical to get it right, according to Emily Miller, the retailer’s senior category manager. “It’s inexcusable to not merchandise appropriately for the [shopper who] comes into brick-and-mortar, because you are so lucky that they are coming into brick-and-mortar,” Miller said, during a presentation at the Path to Purchase Expo last October. “We knew we had a challenge. The customer is in the store for a very short period of time and for an even shorter amount of time in front of the category,” said Liz Picariello, senior category advisor for Coca-Cola Co. “So when you do something for the customer in placing product, you want to make sure you’ve got the placement as perfect as possible.” To bring stronger insights into the annual activity, category leader Coke worked with Walgreens on a testing strategy that Miller called “a simple addition to the reset process – with big impact.” That addition was virtual store experiences, via online environments created by VR specialist InContext Solutions. “This was part of a collaborative business planning process that we have with Walgreens. And it really starts with the shopper,” said Picariello. Knowing that “transaction pack” SKUs such as mini-cans work well among Walgreens shoppers (especially Millennials), the partners used the virtual tests to identify optimal shelf placement for this packaging option. Was a dedicated transactionpack block within an existing brand block the way to go, or would a distinct vertical block merchandising transaction packs from all brands together be more effective? “We wanted to make sure that [the placement] drove category sales and also resonated with shoppers,” Picariello said. Ultimately, Coke and Walgreens wanted the ability to measure the impact on shopper behavior as well as sales, to understand the why behind the metrics.

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The testing process comprised an online survey that targeted beverage-buying Walgreens shoppers and included a link to an immersive virtual store tour. Hundreds of test subjects “walked” through the environment to experience each shelf set variation. Walgreens and Coke then compared the results between the brand and pack-type blocks. The key findings were: • The vertical block drove the highest total category dollars, with a double-digit increase in dollars per shopper for transaction packs. • Transaction packs overall and mini-cans specifically performed best (in terms of dollar sales) in the vertical block. • The vertical block scored higher for preference to shop among all respondents and especially among Millennials — who almost unanimously preferred that option. “To see almost 100% preference of a particular set is very, very significant,” Miller noted. Based on those results, the partners decided to roll out the vertical block to stores. “The in-market results are nearing what we saw virtually,” noted Picariello. When compared with traditional in-store testing, the use of virtual environments dramatically reduces costs, improves speed to market, provides richer sales and attitudinal data, eliminates store disruption, and lowers the risk of resets that won’t work and will cost the retailer even more, Miller and Picariello explained. It also provides a flexible, collaborative testing method that facilitates faster decision-making. “It was very exciting for me to see such a positive outcome as a result of the work that we did together,” said Picariello. “It’s important to use an innovative way (like this) to validate what you need to do for the consumer, who you’re very lucky to have in your store,” concluded Miller.

SMB AWARD Brandless

No consumer goods startup better exemplifies the new marketplace Online-only sales? Check. Direct-to-consumer delivery? Check. Digitally enabled personal communication with consumers? Check. Environmentally friendly business practices and health-focused product formulation? Double check. Charitable donations built right into the business plan? You don’t really need an answer, do you? “None of this could have been done on


legacy logistics networks. They were built to service the old distribution channel by shipping huge pallets of consumer products from factories to warehouses and then to retail stores,” Brandless chief executive officer Tina Sharkey wrote, in an article for e-commerce solution provider Flexe. “That system is broken, and we’re not fixing it.” Of course, Brandless took things one step further by using a brandeschewing strategy to help make a name for itself upon launching in mid-2017. The brand-building process, you see, is just another part of the system that forces consumers to pay higher prices for packaged goods. “We reimagined the entire CPG industry, challenging the notion that better needs to cost more, by providing quality products at a fair price,” Sharkey told CGT back in April, when Brandless was named one of our “Standout SMBs” for 2018. Since then, the company has been building out the product offerings (expected to hit 400 SKUs by the end of 2018), as well as the consumer base. It’s also attracted nearly $300 million in financial support to date, including $240 million from Softbank in July; the Japanese tech investor reportedly liked Brandless’ focus on shopper data and no-frills portfolio. (A joint venture in Asia is in the works.) “Pop-Up with a Purpose” shops in Los Angeles in the spring and New York this fall helped spread the word in person. In related interviews, Sharkey didn’t rule out more-permanent locations, but reaffirmed her vow to keep the Brandless portfolio out of other retailer’s stores.

SUPPLY CHAIN AWARD Nike

The footwear giant’s business plan is a veritable digital transformation blueprint It’s kind of a gross understatement to say that Nike has embraced the new digital marketplace. In fact, the company’s entire business strategy is centered on adopting new tools to transform every process, from manufacturing, to consumer engagement, all the way to product delivery. Examples abound. Introducing 3D printing technology (dubbed “Nike Flyprint”) into its footwear-making practices; moving toward automation at its factories (which will impact 20% of shoe inventory by 2023, Morgan Stanley forecasts); using interaction with Nike Plus loyalty club members to plan exclusive products and services; letting ZIP code-level purchase data de-

Brandless Pop-up stores bring the Brandless branding experience to key cities.

termine store inventory (at the new Nike Live retail concept); allowing consumers to create their own shoe designs (through the “By You” initiative). “Digital is allowing us to realize our vision for smart retail to remove friction and personalize experiences through the intersection of digital and physical environments,” chief executive officer Mark Parker told analysts during a June conference call. “It’s sharpening our ability to sense the market through data and analytics. It’s unlocking new manufacturing tools that are more precise and drive a new aesthetic. And it’s opening up opportunities for new partnerships.” A move to nearshore manufacturing in North America (and elsewhere) aims to reduce lead times from 60 to 10 days. “We are transforming the sophisticated global supply chain, from one where a futures order was historically our signal to start supplying the market, into one where consumer demand is our signal to anticipate and respond,” chief operating officer Eric Sprunk explained at last year’s investor conference. Getting smarter about distribution also means working more closely with 40 “differentiated” retailer partners (both traditional and online) that can deliver best-practice shopper understanding and experiences — and possibly scaling way back on the other 30,000 outlets that are currently in the global network. “The consumer today expects a premium experience, with innovative product and services delivered faster and more personally,” Parker said at the conference. CGT

CONSUMERGOODS.COM | DECEMBER 2018 | CGT

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SUPPLY CHAIN REPORT 2018 BEST-IN-CLASS COMPANIES ARE WORKING TO ENSURE THAT THERE IS NO SUPPLY WITHOUT DEMAND

BUILDING THE CONSUMER VALUE CHAIN Five trends that are transforming traditional business strategies he mission of the modern consumer products company is to create and offer engaging experiences at scale for both consumers (the end users) and customers (mainly retailers). It is no longer sufficient to meet the needs of consumer segments; companies must now meet and exceed the needs of individual consumers, both in ways they expect and ways in which they have not yet imagined.

T IT LE SPO N SO R

SImon Ellis Vice President, Supply Chain Strategies IDC Manufacturing Insights

Strategically, there must be an emphasis on innovation excellence in terms of the success of new products and in the number of new products needed, on the ability of the supply chain to manage different engagement models, and on the ways in which both consumers and customers are engaged — and how that engagement gets funded. Consumer and customer expectations in various product categories will make these strategies mandatory, but implementation success and efficacy will determine profitability and competitive differentiation. The challenge for the consumer goods supply chain, therefore, is to support the broader business in this mission. In part, that will be driven

S U P PORTIN G SPON SOR

PRODUCED BY

CON TENT PARTNERS


F I G U R E 1:

by becoming as ruthlessly efficient as possible, but it also will require the ability to support new, often digitally enabled business models. In IDC’s 2018 supply chain survey, when asked about the drivers of transformation, there was a clear mix of both. Indeed, most of the consumer companies with which IDC speaks see dual goals for their supply chain programs. While the specter of disruption may be in the back of executive minds, the opportunities for digital transformation to drive productivity gains is in the front. While disruption mitigation and/or enablement is a critical part of digital transformation (DX) in the supply chain, in the here-and-now the focus appears to be more on efficiency and waste reduction (see Figure 1). Be that as it may, it’s clearly incumbent on the consumer goods supply chain to be prepared for the future. The competitive environment is far friendlier to small startup businesses than at almost any other point in the industry’s history, and these “ankle biters” now represent a material percentage of overall industry growth. Many are employing digital supply chain capabilities that are central to their business models. With this in mind, let’s look at some key trends for the near future.

5 Trends for 2019 (and Beyond) The consumer goods industry has come a long way in just a few short years. Here are five trends that we see driving change: 1. Over the next decade, 90% of industry growth will be captured by companies that successfully engage directly with consumers. Consumers rule the marketplace; they are ubiquitously connected, crave individuality/personalization and are intolerant of complexity and latency. They are a consumer goods company’s worst nightmare — and its greatest opportunity. It seems intuitively obvious that the companies who figure out how to best engage with these consumers will get more than their fair share of growth. And, by the way, as older consumers give way en masse to Millennials, the “problem” will intensify. 2. As barriers to entry fall over the next five years, smaller “lateral” competitors will wrest

Reasons for Digital Transformation

Horizon 1 60%

Efficiency and effectiveness: Do the things we do today in the supply chain better (Pacer)

Horizon 2 22%

Be resilient to market disruption: Have a supply chain that can quickly adopt to disruptions in the marketplace (Fast Follower)

Horizon 3 18%

Be the disruptor: Supply chain supports new business models or dramatically re-imagined ones (Leader)

65% says it’s about efficency (ROI)

48% expect to be disrupted within the next year

50% of future revenue growth

SOURCE: IDC, 2018

10-15 share points from traditional, established enterprise players. It’s estimated that, of the $35 billion in net industry growth over the past three years, only $1 billion has come from traditional enterprise players. Although small entrants have historically contributed significantly to industry growth, IDC has never seen it this high. What’s more, these new competitors are appearing in record numbers, which means their impact likely is not an anomaly. This is partly because historical barriers to entry (technology, manufacturing facilities, etc.) have fallen; they’ve either become “commodities” or are available via the cloud. Another reason is that, as consumers look either for personalized products that appeal to their generational preferences, smaller competitors are better positioned to be flexible and take risks. 3. By 2020, the contribution of new products (less than 3 years in market) to overall revenue will increase by 20%. Many product categories already experience fairly high SKU churn (cosmetics, for one). This is only going to accelerate over time as consumers become more demanding about personalization and product differentiation. For the purposes of these projections, we define new products as both “Horizon 1” (such as line extensions and variants) and “Horizon 2” innovation (new brands, value propositions, etc.). It likely won’t happen in all product categories, but it certainly will in the health & beauty and personal care segments (to name two). One

“ A S CONSUMERS LOOK F O R P ERSONA LIZED P RO D UC TS , SMA LLER COMP ET ITO RS A RE B ET T ER P OSIT IONED TO BE FLEXIB LE A ND TA KE RIS KS . ” S U P P LY C H A I N R E P O RT | D E C E M B E R 2 0 1 8 | C G T

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SUPPLY CHAIN REPORT 2018

TAB LE 1 :

Top Drivers of Supply Chain Change CRITERIA

PERCENTAGE

13.6% 10.6% 10.6% 9.1% 9%

implication here is the need for companies to up their game in the new product development and implementation process. 4. By 2024, more than half of consumer product manufacturers will rely on artificial intelligence platforms to drive digital transformation across their supply chain, leading to productivity gains greater than 20%. In the last few years, a massive increase in globalization efforts has led to increased complexity across supply chain networks. The number of DX initiatives has increased dramatically, and

FIGU RE 2 :

Level of Digital Supply Chain Maturity (self-reported)

AD HOC

O P P O R T U N IS TIC

Resista n t Businesses that are focused on functional metrics and performance without the considerations of risk and resiliency across the broader organization.

Re a c t i v e Importance of effective risk assessment and supply chain resilience is understood, but ability to move beyond functional siloes or “fire fighting” is limited.

BUSINESS OUTCOME:

BUSINESS OUTCOME:

Company is resistant to changing the supply chain operating model, putting current market position at risk.

14%

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MAN AGED

OPTI M I ZED

C on ne ct e d Systems are in place, and assessment is undertaken, but tools are underutilized and, while cross-functional alignment is promoted, disconnects still exist.

R esi l i e nt Cross-functional alignment drives the risk and resiliency process with extensive use of the systems and globally defines business processes and priorities.

P r oactive Full enterprise-wide functional engagement, comprehensive systems and dedicated personnel enable both anticipation of and rapid response to supply chain disruptions.

BUSINESS OUTCOME:

BUSINESS OUTCOME:

BUSINESS OUTCOME:

REPEATABLE

Limited ability to assess and identify digital opportunities and risk means disruptions often a surprise, resulting in suboptimimal responses. Lack of sustained momentum.

Supply chain largely at par with competition. Ability to assess digital opportunities is improved but not comprehensive, resulting in average competitive performance.

26%

8%

SOURCE: IDC, 2018

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the growth of third-party platform technologies such as mobility, cloud and analytics will continue to have a strong impact on the way data is monitored and consumed. The data analysis that is undertaken will lead to additional insights that can help organizations realize the untapped value in their existing supply chains. 5. Within five years, half of all consumer product manufacturers will be using actual demand data instead of short-term forecasts, resulting in an average “on time, in full” delivery improvement of 2%. As data sets become more commonplace and accurate, from traditional sources like ERP and emerging ones like social media and IoT-powered sensors, it’s conceivable that short-term forecasting will give way completely to replenishment based on actual demand. Demand visibility is much better today than it was three years ago, and there’s every reason to believe it will be progressively better three years from now. Recognizing the need for more flexible supply-side capabilities to engage across different channels and customer groups, manufacturers are already moving away from the restrictive supply organizations of the past decade. The components are increasingly in place, IDC believes, to transform demand replenishment from being primarily forecast-based to being response-based. A supply chain that can replenish in real time should not constrain itself to the “quaint” notion of forecasting. The ability to better engage with customers and consumers, at scale and in real time, will ultimately separate the industry’s winners from the losers. Clinging to the traditional ways of serving the industry will work

S U P P LY C H A I N R E P O RT

Digital transformation begins to drive competitive advantage, against traditional players but also as a way to neutralize emerging, digitally based competition.

Supply chain digital transformation allows business to shape the market as a digital leader and gain market share.

42%

10%


Supply Chain Industry Insights

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A Practical Approach to Digitization Where Artificial Intelligence Makes Sense for the Grocery Industry

Q

To become more customer relationship centric, grocery retailers are embracing new technologies. How can new applications help grocery associates focus on serving customers?

Consumers are exponentially savvier and more demanding than ever before. Knowing your individual customer Global Account and catering to their needs is fast becoming the holy grail Executive for all retailers – including grocery. With buying trends Elementum increasingly impacted by social media influencers, wellness trends, ethical and environmental concerns, and the unexpected, businesses need the ability to respond quickly and proactively. Spending 95%of your time perfecting a plan in order to get 5% better at fulfillment is a fool’s errand if you aren’t able to build a nimble organization. So if you want to create a customer-first strategy, you have to enhance your organization with technology that allows your team to quickly adapt to buying trends and consumer demand changes. Move quickly and pivot.

Tom Perrone

“ Data integration can help the retailer focus on fast-moving, profitable product assortments to meet variable consumer demand.”

Q

How does integrating store level data from across banners and brands into all enterprise systems increase profitability and make operations more seamless?

Data integration can help the retailer focus on fast-moving, profitable product assortments to meet variable consumer demand. But the full value of integration can only be truly realized when data patterns are shared outside of the enterprise and back to the brands and their manufacturers. Brands, including private labels, have a vested interest in improving product life cycles, reducing SKU proliferation and guaranteeing on-shelf availability. In order to do this, companies need to connect across their network and better orchestrate data and action to get ahead of, or better yet prevent, supply chain fires. By integrating multi-enterprise data and enabling joint collaboration, brands can see the interdependencies across their global networks and safely reduce lead-times or inventory, while still delivering on-time and in-full.

Q

How can retailers improve usability, trainability, and reduce errors when implementing user interfaces?

There’s a lot of incredible technology that simply isn’t usable. Most software vendors view the world of retailers and manufacturers as a theoretical science project rather than a real-world problem fraught with challenges that go far

beyond the numbers. When implementing new software, it’s vital to empower your boots-on-the-ground employees by thinking about improving process, rather than technology for technology’s sake. Ideally the design of the software should drive that process, be intuitive, and led by a mobile centric app. If you need an operations research degree to operate the platform, you’re going to waste a lot of resources training your employees and not see a return on investment.

Q

How can artificial intelligence technologies help grocers improve their workforce?

From POS and ERP systems to Supply Chain Management (SCM) software, much of the data needed to make quick, profitable decisions are never available in one place. Most enterprises still export data from multiple systems, load them into a giant spreadsheet and run highly complex models – in a batch – to correlate information and make high-impact decisions. Usually this is done in some head office, far away in time and distance from the actual problem. When it comes to retail and the product economy in general, the power of AI is realized by the ability to aggregate, normalize, and validate all the necessary data across multiple ecosystems into a prebuilt data model so that big decisions can happen in hours rather than weeks. AI will give the necessary leverage for all parties and partners, from individual stores up to the corporate level, to be more farsighted and become more strategic. This is the power of AI - augmenting human capabilities by doing the heavy lifting and number crunching. Empower employees close to your customer.

Elementum is the software-as-a-service company behind the first cloud-native supply chain orchestration platform. In today’s world, instant gratification trumps brand loyalty. To survive, brands must connect across their extended ecosystem so they can operate in real-time and deliver at the speed of customer demand. By digitally mapping the $25T product economy, Elementum’s platform sheds light on the flow of goods around the world, and facilitates cross-ecosystem execution to ensure that products are available at the right time, place, quantity, and cost.


SUPPLY CHAIN REPORT 2018

for a while but eventually will be a marginalizing strategy.

The Survey Says The catalysts for change in the supply chain are both traditional and emerging. Cost efficiency, as we noted earlier, is still paramount. But we also see the implications for new technology sneaking into the top drivers (see Table 1). The top priorities over the next 12 months will be reducing costs (identified by 36% of respondents), improving trade promotion capabilities (26%) and responding more quickly to supply disruptions (24%). Looking out three years, priorities will shift to responding better to demand volatility (33%), reducing costs (32%) and improving visibility (29%). It’s interesting that “customer centricity” was not a top choice, even considering the supply chain respondent base. On the other hand, 87% of respondents said they’re engaged in efforts to improve visibility across the supply chain. Buy-side B2B is the top area for collaboration (35%), with internal issues still a focus for some companies (18%). Given the focus on more modern challenges, one would expect that self-reported digital supply chain maturity would skew to the less mature. However, that is not the case. In Figure 2, we summarize the five stages of maturity for the digital supply chain, and the

“ CLI NGI NG TO T HE TR ADI TI ONA L WAY S OF SE R VI NG T HE I NDUSTRY WI LL WOR K F OR A WHI LE BUT E V E NTU ALLY W I LL BE A MARGINALIZING S T R ATE GY. ”

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S U P P LY C H A I N R E P O RT

percentage of respondents who’ve achieved each. Based on the data, more than half of respondent companies believe they’ve reached the two most mature stages. (Of the companies in the survey, almost half are small or medium-sized businesses.) In reality, we really don’t think anywhere close to 52% of companies are in either the resilient or the proactive stages of maturity. So what is going on? Do companies misunderstand what it means to have digital competencies in their supply chain? Are they unclear about what capabilities they must have to be competitive in the future? Or perhaps it’s just that the way forward is still unclear, and that striving for “the best I can be today” is good enough. It may well be that it is all of these things. The challenge, then, is not just about believing or disbelieving the response data, but about understanding what’s driving the responses and why companies think they’re further ahead than they probably are. After all, 48% expect to be disrupted within the next year (Figure 1).

Advice for the Tech Buyer Today’s consumers (and by extension, the retailer customer) have far more power in the buyer/seller relationship, due both to the abundance of information available to them and an increasingly competitive brand environment. This fact is driving product manufacturers to identify additional sources of competitive advantage by which to better satisfy increasingly demanding customers. Manufacturers now compete in a fast-paced, information-intensive world in which both successes and failures exist with complete transparency. There is pressure to manage both inter-company and intra-company processes with greater alacrity. Standing pat is the surest way to fall behind. IDC recommends a number of actions. They revolve around thinking about the future of the business, the likelihood of industry disruption, and the specific solutions technology can provide: • Avoid “technology for technology’s sake.” Instead, solve business problems or seize on opportunities. IDC still gets manufacturers asking about “setting up our own IoT lab” or some such nonsense. Are you a technology company? If “no” is the answer (and it often is), manufacturers should instead work with a technology partner and focus their efforts on understanding how technology will help solve existing business problems (or anticipate future ones). • Decide if a digitally enabled supply chain is important to how you currently run your business or how you expect to run the business in the future. • Have a clear supply chain strategy and end goal: What do you want to be, when and how, in the context of creating market-altering customer and consumer experiences? Determine the extent to which the supply chain can support new business models. • Take an “outside-in” approach to digital transformation and the supply chain. Work with external partners to define and develop capabilities; don’t try to do yourself what others can do better for you. • Be objective about where you are and where you need to be. Many companies believe themselves to be far more advanced than they actually are and, as a result, may fail to act when and where necessary.


DISRUPT OR BE DISRUPTED IDC and Oracle outline key deliverables for the digital supply chain

n a world in which consumer satisfaction with brand products and services directly impacts organizational success, it is imperative that companies think, plan and execute differently than they have in the past. The list of business process changes, initiatives, and investment opportunities is long and the stakes are high for creating best-in-class supply chain visibility, efficiency and consumer fulfillment experiences. The bar for fulfilling both business performance expectations and consumer expectations is higher, and companies need to act now to both reduce costs and add more consumer value in order to stay competitive — if not stay in business. The best supply chains will be built on strong foundations with data at the core, and as new inputs, outputs or technologies are added to the mix, processes will be adapted, maintaining or improving operating efficiencies while improving service. New partnerships will be formed, ecosystems cemented, and services through which to access them will be revolutionized. Industry 4.0 solutions, including digital core technologies — IoT, AI/cognitive computing, blockchain, mobile, and voice — radically change the level of precision at which movements, activities, and processes can be managed. Running IT supporting supply chains becomes less critical for some companies, and they hand off control to managed service providers. Others find that running as a SaaS or cloud-based capability offloads enough of the mechanics of IT while improving the ability to innovate and drive successful outcomes for their companies. The fully digital supply chain enabled by Industry 4.0 is built on a common shared data core and essentially one version of truth. It is also a secure and transparent platform for seamless data exchange and collaboration. The following are critical implications with thoughts regarding how to take action. The consumer supply chain needs to deliver:

“ T HE B EST SUP P LY CH A IN S WILL B E B UILT ON STRO N G FOUND AT IONS WIT H D ATA AT T HE CORE.” • Convergence among consumer goods and retail (direct-to-consumer models, enhanced collaboration). Retailers are expanding private brand portfolios, and consumer goods companies are figuring out how to influence and sell to the consumer directly; disruptive brands often start with a small set of products or a service finely tuned to fill a gap or take a fresh approach to solve for a consumer need. Companies need to be hyper-aware of shifting consumer trends and buying patterns, focus more on product and service innovation, and respond adroitly in areas forecast to be hot opportunities or implement the necessary defensive moves. • Omnichannel solutions. As the identities of consumer goods and retail companies converge, driving towards a common data core becomes more important. Retail and manufacturing solutions will, of course, operate independently and have independent master files, but access to common customer, vendor, product, and sales history records becomes imperative. Marketing and fulfillment objectives align with customer satisfaction, and best-in-class supply chain execution makes satisfaction possible. Companies should evaluate the data that could be transformed to enable better consumer satisfaction. • Product transparency and traceability. As marketplace product portfolios expand and global goods are available everywhere, issues of authenticity become more prevalent, and consumers desire more transparency and validation that the product they are buying is certified authentic and is what it claims to be. Similarly, as the planet becomes more populated, the food supply chain needs to evolve processes that improve quality and safety and reduce waste. Technologies such as IoT and blockchain can pinpoint a lot — a farm, or an animal that may, for example, be the source of a tainted product that needs to be recalled, or perhaps just traced for compliance reasons. Writing essential information to the blockchain at each crucial stage in the supply chain can help provide inter-enterprise visibility, as well as an immutable digital record. • Real-time visibility. People can be more productive when visibility, enabled by IoT, improves the orchestration and execution of supply chain

S U P P LY C H A I N R E P O RT | D E C E M B E R 2 0 1 8 | C G T

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SUPPLY CHAIN REPORT 2018

processes. Coupled with AI and machine learning, processes can be continually improved and continuously automated more, reducing human interaction requirements, improving inventory accuracy and enhancing performance results. • Conveyance reinvented. Best practices in inventory visibility, combined with best-practice last-mile delivery execution, results in the highest possible fulfillment customer satisfaction ratings. Inventory visibility enabled by IoT solutions that include sensors, data capture, and analytics solutions is the first step towards no compromise-no disappointment fulfillment. But if you combine near-perfect inventory accuracy as a result of these IoT capabilities with best-in-class, distributed order management-driven, last-mile fulfillment solutions, products can be staged with more precision and pick, pack, and ship operations can respond most efficiently. The action required is clear: IoT for inventory visibility and distributed order management solutions. Traditional incumbents (with legacy, etc.) must

“ A S T HE ID ENT IT IES O F CONSUMER GOOD S A N D RETA IL COMPA NIES CONVERGE, D RIVING T OWA RD S A COMMON D ATA CORE B ECOMES MORE IMP OR TA NT.” embrace digital transformation lest they find themselves disrupted, and must take actions to think, plan, and execute differently than they have in the past. Whether being a disrupter is an objective or not, behaving like a digital native should be. Excerpted from “The Future of the Supply Chain: Disrupt or Be Disrupted,” an IDC White Paper sponsored by Oracle (Simon Ellis, Leslie Hand, Ivano Ortis; September 2018).

RESPONDING TO DISRUPTION INNOVATIVE COMPANIES PROVIDE A BLUEPRINT FOR SUCCESS

he IDC research report commissioned by Oracle (see page 19) identified four major trends that are reshaping today’s supply chains. Here, we’ll look at some innovative companies that illustrate how traditonal players can respond to these trends.

1. Consumer Engagement It’s not surprising that today’s hyperconnected consumer is driving the changes we’re seeing in the retail and consumer goods industries. Consumer-centricity is no longer a buzzword; it’s the only way for organizations to survive. IDC predicts that roughly 90% of industry growth in

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S U P P LY C H A I N R E P O RT

By Mario Vollbracht, Global Director, Consumer Products Oracle

retail over the next five years will be captured by companies that successfully engage directly with consumers (see page 15). If they aren’t already, companies must focus relentlessly on personalization and frictionless commerce. This translates into making it easy for consumers to shop when and where they like, and tailoring products and services to their needs. Exponential advancements in technology over the past decade have made this possible. Personalized styling service Stitch Fix is a great example. The company blends human expertise, advanced data analytics, and machine learning to make it easy for people to find clothes they love matched to their individual style.

2. Nimble Outcompetes Scale Barriers to entry that traditionally existed in the retail and consumer goods industries have fallen. This is due to technological innovations, such as ease


Supply Chain Industry Insights

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Achieving Total Control Over the Omnichannel Challenge A Q & A with Greg Brady, CEO of One Network

Q

H ow has the growth of e-commerce disrupted traditional supply chain models? What are the key ways in which consumer goods companies are addressing these issues? The focus has changed from pure store delivery to store Greg Brady plus home delivery, and this has created a number of Founder & CEO supply chain issues, largely because there are many more One Network points of consumption to consider. Order quantity sizes are no longer limited to truck loads, so you have to be able to manage parcels and provide a higher level of service to meet consumer expectations. Micro order quantities create a need to optimize time and location to fulfill orders, as these quantities dramatically impact the standard truck load replenishment. Leveraging solutions such as our multi-party digital network platform and services makes this a non-issue. It doesn’t matter how many different channels, processes, order quantities or fulfillment strategies you use, because our system naturally adapts.

Q

What tools are consumer goods companies adopting to improve supply chain visibility across the entire enterprise? There is a big trend in the market around what are called “control towers.” However, as is true in all early stage markets, confusion abounds; everyone wants to claim they offer a control tower. Transportation solution vendors want to claim that their transportation-only related control tower is a control tower. Those who do only demand-type processes want to claim that that is a control tower. In reality, what the market and CPG companies need, and what One Network provides is a true multi-party control tower that fuses all demand, supply, and fulfillment data into a single real-time, permissioned, multi-party network. A true control tower should manage everything from consumer demand to fulfillment, and match all demand and supply between all parties. Besides providing a real time multi-party network, the benefit of a “true control tower” is the ability to leverage the rich data by taking advantage of artificial intelligence (AI) and machine learning (ML) capabilities. When AI/ML is combined with a real-time network, these autonomous processes can plan and execute at a new level of scale and accuracy, with or without limited human intervention. Hence the name “control tower”. There was a recent study by the University of North Texas that found the expected fixed leads time across the US for traditional dry groceries is about 18 days. The traditional CPG company runs upwards of 60-65 days of inventory, while the average in-store in-stock is 96 percent. If you run a promotion, that number drops as low as 80 percent. This suggests that there is a real

need to improve on these metrics. CPG companies running on multiparty networks using AI/ML solutions have reached as low as 25 days of inventory with in-store and in-stock as high as 99 percent. Gartner’s case study on Del Monte proved that there is a real opportunity to digitize your supply chain and dramatically reduce inventory while significantly improving service levels and revenue sell through. These kinds of results can only be realized when autonomous AI and ML systems have real-time access to data spanning demand all the way back to supply on a network platform. The solution Del Monte used was One Network.

Q

In what ways have additional data streams and analytics tools enhanced the supply chain planning and/ or execution processes? Good question, however I would rephrase it and ask, “In what way can true industrywide data allow you to adapt and change the planning and execution processes in a new way?” What we call autonomous agents within our network, other people call cognitive systems, AI and ML tools. These autonomous agents allow you to take the forward-most demand data, and apply that against upstream supply information across any number of tiers. Then the system can automatically execute a demand-driven or pull-process. This moves supply to where the actual demand is as efficiently as possible while maintaining the highest possible service level. That’s the “Holy Grail “ of supply chain.

Founded in 2002, One Network provides a multi-party Intelligent Business Platform solution powered by AI and Blockchain that delivers rapid results at a fraction of the cost of legacy solutions.


SUPPLY CHAIN REPORT 2018

of access to manufacturing and logistics resources. According to a recent Clarkston Consulting study, this change resulted in an $18 billion market share shift from large companies to small- and midsized businesses from 2016 to 2017. There are some phenomenal success stories that illustrate the rise of nimble and new market entrants, such as the digital natives that take on the Goliaths of the industry through innovation and agility. Warby Parker is an online retailer of prescription eyeglasses. The company was founded by four Wharton MBA students who noticed a few, large players dominating the eyeglass industry. It initially launched a basic e-commerce website, offering prescription glasses at a fraction of the typical retail price. Today, the company is valued at approximately $1.75 billion and is growing fast. Warby Parker leverages technology to modernize processes typically found at an eyeglass store. For example, measuring eye pupil distance is done from the comfort of your home by holding a credit card in front of your face and taking a picture. Since all credit cards are the same length, that length can be used as a calibration to calculate the actual pupil distance.

3. Consumer-Friendly Fulfillment Today’s global enterprises need 100% visibility of their inventory — from supplier to consumer,

“T OD AY’ S GLOB A L E NT E R PR I S E S NE E D 100% V I S I BI LI TY OF T HE I R I NV E NTO RY — FROM SUPPLIER T O C ONS U ME R, A ND F R OM PA C K T O PAR C E L. ”

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“ IF T HE Y A R EN ’T A L REA D Y, CO MPA NIE S MUS T F O C US R EL EN TL ES SLY ON P ER SO NA L IZATIO N A N D F RICT ION LE SS COM MERC E. ” and from pack to parcel, down to the unit — to ensure timely fulfillment. Businesses have invested millions of dollars in their interaction with consumers, but they now need to focus on delivering on their promise of the right product at the right price and the right time. Connected consumers, buying from their mobile devices, need to know that their purchases are being fulfilled with urgency and accuracy. Supply chains have gone from being a cost center to a competitive business differentiator. Direct to consumer brands are built around this promise: Dirty Lemon Beverages only takes purchase orders via text message; Function of Beauty lets consumers create their own shampoo formula, then puts the buyer’s name on the bottle.

4. Elevate Innovation Where retailers and product manufacturers once were highly complementary partners in the consumer goods ecosystem, they have now become — to no small extent — direct competitors. Retailers have become formidable brand manufacturers across the globe, with private label brands experiencing continued, phenomenal growth. Take supermarket retailer Kroger as an example. In a mere five years, Kroger has built a portfolio of leading private-label brands from nothing to more than $20 billion in sales. Most innovation nowadays comes from new, small entrants. These newcomers have been successful in taking on the big incumbents in very established categories. Method Products entered a mature household cleaning market that was dominated by a handful of large brand manufacturers such as Procter & Gamble and SC Johnson. Two friends saw an opportunity to make and market eco-friendly cleaning options. Method grew quickly to more than $100 million in revenue before being acquired.

The Moral to the Story In this era of endless disruption, technology has transformed retail and brought about a rapidly expanding digital marketplace. The only way to meet consumer expectations and exponential change is through technology that is built to scale and can evolve. Tomorrow’s business will employ enterprise-grade, cloud-based solutions to meet the challenges of a highly complex marketplace. That means using a digital supply chain that enables end-to-end visibility of goods, data, and customer feedback. CGT


Tech Solutions Guide

2018

CUSTOMER MANAGEMENT

How has the Q shift to omnichannel retailing affected

SOLUTIONS

traditional strategies for effective customer collaboration?

GUIDE

In this edition of the Technology Solutions Guide series, CGT presents a comparison chart of solution providers on the forefront of customer management. To kick things off, a roundtable of experts provides thought leadership on navigating the challenges and opportunities involved in the effective management of retailer relationships in an omnichannel marketplace.

DR. STEFFEN ZIMMERMANN

MICHAEL CAI

Chief Executive Product Management Officer Senior Manager eBest Mobile

Accenture

CONOR KEANE

DAVID GOTTLIEB

Chief Executive Officer

Managing Director, Americas

Spring Global

Trax

ZIMMERMAN: Although we have seen technology eliminate historical barriers to market entry and increase opportunity for direct-to-consumer engagement, product manufacturers must maintain a careful balance. On one hand, they must focus on nurturing longstanding relationships with retailers — who account for a significant proportion of their current business. On the other hand, they need to explore new channels — such as social and e-commerce — to reinvent their marketplace relationships to unleash growth opportunities in an otherwise stagnant market. Successful companies will build and collaborate with an ecosystem of suppliers, peers, distributors, startups, and retailers to respond to market and consumer demands at speed.

SPONSORED BY

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Tech Solutions Guide

Sharing POS and consumer preference insight data are just some of the ways retailers and manufacturers can work together to avoid out-of-stock situations as well as define new and faster ways of delivering highly relevant products instore at the right time and with the right buying incentives. CAI: Regardless of size, companies can no longer afford to offer a single strategy for customer collaboration. They must be flexible, offer multiple options, and tailor strategies to the channel and the customer. Over the last 10 years, technology has been fully embraced and embedded into everyday life — both personally and professionally. Now, customers expect their vendors to provide services when and where they need it. When it comes to collaboration, your sales rep in the field is no longer the main point of contact. But, in order to be effective, field reps must have access to better information from more sources. It’s critical for data to be intelligently filtered and shared with field sales reps in a way that is actionable and

“CGs can better tailor POS activity thanks to the increasing granularity of data and shopper insights available.” STEFFEN ZIMMERMANN, ACCENTURE

enables the front line to provide proactive services and solutions.

much more merchandising and consultative advice on how to sell more.

KEANE: We view the world from a retail execution point of view, so omnichannel for us means that manufacturers are splitting their channel coverage. Instead of dedicated field reps visiting every store every time, manufacturers are segmenting their stores, only visiting smallvolume stores occasionally, and having the store manager order via web portals or having an outbound inside sales function taking orders. The key is to have a single, unique view of your customer, so it’s best to use one ordertaking solution. The field sales rep function starts to look more like a hybrid role with sales order-taking mixed with

GOTTLIEB: The move to omnichannel has effectively multiplied the complexity around planning for shopper demand and balancing inventory cost with service level. Retailers and their CPG trading partners have gotten reasonably good at understanding inventory needs at the store level by looking at traditional metrics. But the introduction of new, less predictable volume from e-commerce orders fulfilled in-store has created a need for the entire ecosystem to have better, more timely insights about store conditions — down to the specific item/ fixture combination in order to avoid disappointing shoppers.

“Field reps must have access to better information from more sources. It’s critical for data to be intelligently filtered and shared.” MICHAEL CAI, EBEST MOBILE

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Q

What stresses have these changes placed on existing planning and management tools? CAI: I think omnichannel retailing has actually created opportunities for companies that are willing and able to embrace the strategy. Not only does it


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Tech Solutions Guide

“It is more important than ever to ensure your retail/in-store strategy is brand-focused and refined.” CONOR KEANE, SPRING GLOBAL

make it easier for customers, but it provides an opportunity for manufacturers and suppliers to gain insights and react quickly to changing market conditions. Of course, omnichannel retailing comes with its challenges. Building out capabilities and continuously monitoring, revising, and improving customer collaboration methods won’t happen overnight. We’re in constant development to meet the changing needs of CPG organizations, but it’s imperative that we stay focused on providing retail execution tools that can support today’s needs. To be effective today, seamless connections across internal and external systems is a must. GOTTLIEB: Existing tools are generally designed around the idea that units or dollarssold-per-day-per-store is the ultimate measure that should be used to build an understanding of the shopper and store dynamics at an outlet level. The addition of e-commerce as a demand driver for each store means that demand can quickly deviate from historical patterns. The shopping time of day and day of week can change; plus, shoppers may move from self-shopping the store to a mix

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of delivery, click-and-collect, or all three. This increasing complexity makes it ever more critical that manufacturers and retailers have a shared view of the store — one that is continuously updated, allowing them to enhance planning and collaboration. KEANE: With the rise of competing upstart and local brands, and consumer shift s to at-home delivery and online shopping, it’s more important than ever to ensure your retail/in-store strategy is brand-focused and refined. Brick-and-mortar retail is still relevant and innovating quickly. When consumers do shop retail, they expect product to be on the shelf and available. Prevailing retailers are thinking more about the entire customer experience, meaning

the consumer might first view the product in-store but then later decide to order online or vice versa. So the merchandising activities must tie into the manufacturer’s marketing activities that are going on independent of store sales and promotion. The product better be on-shelf and priced in line with any promotion, and the e-commerce portal needs to be consistent with the in-store experience. ZIMMERMAN: Consumers have come to expect a smooth and seamless experience. This places pressure on CG companies to create a modern enterprise that can meet those expectations across digital and traditional channels. CGs are looking into retail activity optimization, using the data gleaned to suggest the best course of action. Omnichannel insight data can be used to decide which retailers to visit and where the greatest opportunities for commercial impact lie. The result? Enhanced customer relationships and better and more effective use of the sales team’s time. More than ever, it’s crucial

“We likely will see many AI-driven insights making their way into the standard collaboration process in the coming months and years.” DAVID GOTTLIEB, TRAX


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Equip your field team with one mobile solution for field sales, van sales and merchandising:

www.springglobal.com


Tech Solutions Guide

that the data being used to inform selling strategies is high quality. Inaccurate or manipulated information threatens to compromise the strength of insights CGs can rely on when planning how best to operate and generate profitable sales. Connected front-office solutions can pull and aggregate data from different omnichannel sources to enhance retail activity optimization. When it comes to planning and customer segmentation, CGs can better tailor POS activity thanks to the increasing granularity of data and shopper insights available.

Q

What role can artificial intelligence play in improving the manufacturer-retailer relationship? CAI: AI, machine learning, Internet of Things — these all can be used to improve the manufacturer-retailer relationship. These technologies can ensure the retailer has the right products available, at the right place and the right price for the consumer. They can also be used to increase sales, reduce out-of-stocks and decrease product returns, which creates a win-win for the manufacturer and retailer. To be effective, AI strategies cannot be “one size fits all.” For example, fast-moving products may require IoT to monitor stock and ensure availability at the shelf. Slower moving products can capitalize on AI to better understand conditions

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that will improve sales. In some cases, AI can provide accurate predictive orders to not only ensure availability, but to allow manufacturers and retailers to focus on faster-moving or higher-margin products. AI is going to be a real game changer for the industry. GOTTLIEB: AI will be the mechanism whereby the “baseline” of shared understanding is elevated. Today, many manufacturers and retailers have begun to use, at a minimum, a common set of data for itemunit and dollar sales. In the future, as AI is implemented and trusted more broadly, we will see this baseline being raised by additional metrics and insights that will not need to beX debated but rather can be part of the foundation of collaboration. Each retailer may move individually down this path and at a pace that makes sense for their culture and risk tolerance. But, we likely will see many of

x

these new AI-driven insights making their way into the standard collaboration process in the coming months and years. ZIMMERMAN: AI has huge potential to strengthen the relationship between the manufacturer and retailer. By sharing accurate data and consumer insights, they can work together to train AI to deliver better insights, predict consumer preferences and behavior, enable new business models (such as subscription services) and, ultimately, strengthen brand image through enhanced personalization. By taking the data held within companies (such as that gathered by social media listening, sentiment analysis and POS) and working to unlock the valuable insight that it holds, AI has the potential to not only get a better sense of consumer preferences, but to help reimagine and shape offerings


HUNDREDS AND THOUSANDS OF PRODUCTS Accenture Cloud Solutions for Consumer Goods. accenture.com/cloud.cg

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Tech Solutions Guide

available in-store. AI has the potential to bring “anywhere anytime” insights to CGs and retailers, helping them make quick decisions in real time. But, AI can only be optimized if people skills are augmented along with the technology. KEANE: CPG is a great use case for AI because of the huge multi-year data sets available. Every manufacturer has studies

underway to optimize stuff like out-of-stock, perfect assortment, suggested order, and pricing. The challenge is making sure they’re executed in the field. We see adherence ranging from 0% to 30%, meaning as many as 70% to 100% of sales reps ignore the algorithmic suggestions. So, we’re focused on adherence and compliance. You must take a huge data set and parse it so that relevant

2018 C O MPA N Y /WE B S IT E

CUSTOMER MANAGEMENT

CHART

KEY CO N S UMER GO O D S CLIENTS

UNIQUE FEATUR ES /B ENEFITS

Accenture Cloud Retail Execution

• Unilever

Accenture Cloud Retail Execution leverages the power of the Salesforce platform with Accenture’s industry experience to provide retail execution management, cycle planning, visit planning, a 360-degree customer view, dashboards, in-store execution, and performance monitoring.

AFS Retail Execution

• Carlsberg • Nestlé • PepsiCo

With AFS RE/DSD, clients serve all channels through a single point of execution and administration, sharing common master data and a single integration source with the ability to deploy differentiated guided selling/merchandising activities.

SHOPT

• LALA • Mizkan • Unilever

By automating the creation, execution and analysis of retailer-specific shopper marketing, SHOPT empowers CPG brands to exceed the growing demands of retailers who want more from their supply partners — more agility, more personalization, and more measurement.

eBest iMarket

• Coca-Cola • Petronas • Procter & Gamble

Built on the Salesforce.com platform, eBest Mobile solutions offer a fully integrated, 100% frontlinefocused product suite to accelerate productivity and mobilize and automate go-to-market operations across the globe.

Exceedra Integrated Business Planning Solution

• ACH Food • Bayer • Reynolds Consumer Products

Exceedra provides integrated business planning and revenue management solutions that enable clients to simplify their sales, finance and demand planning processes and gain clearer visibility on trade spend ROI. Clients have achieved greater performance in TPM/TPO, customer business planning, joint business planning, demand planning and S&OP.

P RODUCT

Accenture

https://www.accenture.com/ us-en/service-solutionsconsumer-goods?src=SOMS

SEE AD ON PG 29

AFS Technologies https://re.afsi.com

Cierant

www.cierant.com/ explore/shopt/

eBest Mobile

www.ebestusa.com SEE AD ON PG 25

Exceedra

www.exceedra.com

30

suggestions are presented in the context of the visit. Likewise, the results of their action are fed back to the data lake to update the data set and train the AI engine. Algorithm wars? We are already seeing multiple algorithms being fed into the field, often offering conflicting advice. Which ones prevail and why? We think that “perfect visit orchestration” will become more prevalent in 2019. CGT

CGT | DECEMBER 2018 | CONSUMERGOODS.COM


Tech Solutions Guide

C O MPANY /WE BSIT E

Field Agent

www.fieldagent.net

GoSpotCheck

www.gospotcheck.com

Ivy Mobility

www.ivymobility.com

Pepperi

www.pepperi.com

Repsly

https://www.repsly.com

RW3

www.RW3.com

KEY CONS UMER G O OD S CLIENTS

UNIQUE FEATUR ES /B ENEFITS

The Field Agent App

Did not provide

Brands and retailers look to Field Agent to be their “eyes and ears” in places where they cannot be physically present, whether that’s in stores with their products or in homes with their customers. We go on-location to acquire information where it’s most needed.

Real-Time Execution Management Platform

• Beam Suntory • Danone • PepsiCo

GoSpotCheck is mobile form and execution management software that enables team leaders to improve workforce operations. Organizations can assign tasks, analyze real-time reporting, and drive action to accomplish critical goals and objectives.

Ivy Industry Cloud Solutions

Did not provide

Ivy’s cloud solutions empower consumer goods organizations to unify the sales, merchandising and distribution operations in support of multiple routes to market, user roles, and products.

Pepperi

• Dermalogica • Hallmark • Heineken

Pepperi is designed for B2B sales and combines mobile CRM with mobile order-taking, retail execution, route accounting and B2B e-commerce in a single commerce platform.

Repsly

• Chobani • Canon • KeVita

Repsly’s retail execution software empowers CPG teams to make data-driven insights and achieve peak performance in the field through a powerful manager’s dashboard and mobile app.

Selling 360

• Chobani • Nestlé • PepsiCo

Selling 360 provides professionally designed, factbased selling presentations that include up-to-date sell sheets and reports that account managers can create within minutes and share with their grocery partners at the store and headquarters level.

SAP C/4HANA

• Edgewell Personal Care • New Era Cap • Pladis

SAP’s in-memory customer experience suite offers cloud solutions for marketing, commerce, sales, service, and customer data — and uses intelligent technologies like machine learning to power real-time engagement.

Field Service Management Application

• Kraft Foods • PepsiCo

Spring Global’s field services solution offers a complete library of packaged applications to support efficiency in sales, van sales, merchandising and data insights.

TouchCG

• Kellogg • L'Oréal • Mondeléz International

StayinFront has been providing a full suite of mobile, cloud-based field force effectiveness and customer relationship management solutions for consumer goods organizations in more than 50 countries for over 20 years.

CRM for SYSPRO

• Benchmade Knives • Seattle Chocolate • Taylor Guitars

Companies have been interested in knowledge management for decades. SYSPRO has evolved content management technology to make the utilization of knowledge an important business tool.

P RODUCT

SAP

https://www.sap.com/ industries/consumergoods-cpg.html

Spring Global

www.springglobal.com SEE AD ON PG 27

StayinFront

www.stayinfront.com

SYSPRO

www.us.syspro.com

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DECEMBER 2018 |

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Tech Solutions Guide

2018

CUSTOMER MANAGEMENT

CHART

C O M PA N Y / W E B S IT E

P RODUCT

KE Y CO N S U MER GOO D S CLI ENTS

UNIQUE FEATURES /B ENEFITS

Third Channel

Retail Intelligence Program

• New Balance • The Honest Company • Samsung

ThirdChannel offers sustained, high-quality execution in stores with exclusive, dedicated, on-brand agents that use powerful cloud-based technology to provide advanced insights that immediately impact brand sales.

Trax Retail

Trax Retail Execution

• Amatil • Coca-Cola Co.

Trax Retail Execution is a computer vision-powered in-store execution solution that provides CPG companies a comprehensive, real-time view of store and field performance across all retail channels.

BluePlanner Revenue Management Solution

• Danone • Ferrero • Vita Coco

UpClear’s SaaS model, flexibility and speed of deployment has made it the revenue management tool of choice for CPG companies of all sizes across more than 20 countries globally.

Did not provide

Wipro’s integrated sales and marketing platform is focused on driving better insights, thus bringing together the various sales and marketing streams that graduate someone from knowing a consumer to sensing and proactively driving consumer behavior.

www.thirdchannel.com

www.traxretail.com

UpClear

www.UpClear.com

Wipro Ltd.

https://www.wipro.com/ consumer-packagedgoods/

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Integrated Sales & Marketing Platform

CGT | DECEMBER 2018 | CONSUMERGOODS.COM


SPONSORED SECTION

TRADE PROMOTION MANAGEMENT

CGTechTips The ABCs of Trade Promotion ROI With only 40% of trade dollars delivering a positive ROI, optimizing efficiency is a critical initiative for consumer goods companies, who are under intense pressure to improve their historical performance levels. In the latest edition of CGTech Tips, subject matter experts from UpClear and Visualfabriq examine the steps that companies should take to change the way they do things and ensure that their trade investments aren’t squandered.

SPONSORED BY


CGTechTips

S P O N S O R E D

C O N T E N T

Trade Promotion Management

5 Fundamentals for Effective Trade Spending It is frequently claimed that only 40% of trade dollars deliver a positive ROI, so optimizing trade spend efficiency is vital to keep consumer goods companies from misspending the other 60%. Here are five tips that, from my experience, should be considered to ensure that the investment isn’t squandered. RAJEEV PRABHAKAR CLIENT SERVICES DIRECTOR, AMERICAS UPCLEAR INFO@UPCLEAR.COM

Define Consistent KPIs - Have the basics in place to calculate ROI – CG companies need to understand, for example, what their base volume is (i.e. how much of a product would sell if it wasn’t on promotion); pricing, both promoted and non-promoted; the allocation of trade spend into defined “buckets” and how to allocate invoices from customers to specific promotions and then correctly into the P&L. Once these building blocks are in place, then the ROI of trade investment can be calculated. Focus on Measuring - Accurately forecasting spend and volume prior to an event drives good decision making, enabling potentially poor activities to be modeled better. Similarly, good Analytics and reporting of ‘Actual’ performance, post-event, feeds back into the learning loop, again driving better decision-making for the future. Create a Data ‘One-Stop-Shop’ - Bringing all the available data, from internal metrics to 3rd party inputs, together into one place for the sales teams makes both of the first two points so much easier. Companies that can manage, control, and report on their trade spend within a single solution that integrates data from across the business are shown to be more efficient, make better decisions, and capture more value. Think ‘Win-Win’ - Use the insights that this data gives to then have collaborative conversations with customers. In an ultra-competitive market, having a fact-base which

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CGT | DECEMBER 2018 | CONSUMERGOODS.COM

can prove revenue can be profitably generated without “racing to the bottom” will help drive effective promotion management. If you can clearly demonstrate, for example, that a 25% price promotion will generate almost as much uplift as a 33% discount with both parties retaining that additional margin, it is a win-win. Remember the 4Ps - Don’t look at trade promotion management in isolation: it is but one of the “4Ps”. Copying and pasting the 2018 promo plan into 2019 is a useful start, but how long is this sustainable given cost price pressure, changing consumer behaviors, and a dynamic retail environment? Also consider whether the product is correct for the channel, is the pack meeting consumer needs, and does the pricing give room for headline growth? Once these questions have been answered, only then can the promotion strategy and the processes delivering it be optimized effectively. Given that trade spend is often the second largest line in the P&L and that promotion management touches practically every part of an organization, ensuring the process is optimized is vital to long-term sustainability. Only by managing this investment effectively and efficiently can CG companies ensure that their dollars are not wasted.


CGTechTips

S P O N S O R E D

C O N T E N T

Trade Promotion Management

Winning More with Trade Promotions

JACO BRUSSÉ CO-FOUNDER AND CHIEF EXECUTIVE OFFICER VISUALFABRIQ INFO@VISUAL FABRIQ.COM

The pressure for consumer packaged goods companies to improve ROI when it comes to trade spend has become immense. One thing is for certain: CPGs won’t get back to winning with trade promotions if, year on year, they are simply repeating old plans. Every individual investment needs to be reliably assessed. At the time of planning, CPGs need to know whether they’re choosing the winning promotion out of all possibilities. The volume and financial impact of each promotion in the plan needs to be properly understood. Leading companies have broken out of the year-on-year repeat of trade promotion strategy and plans. These are the three ways they are doing things differently: Look forward, not backward Traditionally, organizations evaluate the past in monthly or quarterly cycles, trying to derive rules to apply to promotion plans once per period. But by then, many promotions have already been offered to retailers, making it hard to effectuate change; similarly, ad hoc negotiations often escape these rules. Companies that harness the full power of their data are instead empowered to look forward by using insights and prediction models during the actual promotion proposal and negotiating process. The days of sticking fast to an annual plan devised perhaps 18 months before are long gone. CPG companies that win more are the ones able to plan, deliver and adjust trade promotions much more quickly, so that they’re suitably responsive to what is currently trending with consumers. Take the integrated view of profitability and reliably explore alternatives Winning promotions are the norm at CPGs that have transformed into process-led organizations aligned around endto-end processes and making data-driven decisions based on a single version of the truth driven by customer metrics. Before offering it to a retailer, the promotion needs to be evaluated on volume, revenue and profit impact for all stakeholders in the trade channel. A single version of the truth showing both

manufacturer and retailer perspectives brings transparency and enables collaborative, win-win decision-making. For this to happen, different scenarios out of all possibilities need to be modelled and reliably compared in terms of volume, revenue and margin during the planning process, so there’s certainty about what a winning promotion will be. Trust the machine Powered by solutions employing applied artificial intelligence and machine learning, leading CPGs have reliable ways of predicting scenarios and understanding ROI for each individual promotion during its planning. Developments in AI and ML have led to prediction models that outperform human estimations by 20% to 30% in forecast accuracy and can directly compare scenarios. This can be precisely translated into better promotions, more reliable expectations and significantly less work for account managers — who are then freed up to manage the exceptions instead of micro-managing everything. We see CPGs planning their best promotions by trusting the machine to complete 80% of the traditional work. Thanks to AI, there is a new era dawning in trade promotions where the goal is to drive much-needed, sustainable company growth instead of providing inconsequential incremental lifts from time to time.

WWW.VISUALFABRIQ.COM

CONSUMERGOODS.COM | DECEMBER 2018 | CGT

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CGT - December 2018  

CGT - December 2018